In the immortal words of Johann Wolfgang von Goethe, “a confusion of the real with the ideal never goes unpunished.” Holacracy’s idealism, as well as its failure to grasp human nature, has led to serious flaws, ones which will only worsen as time goes on. And to make matters even more dire, as Holacratic systems implode, they take their client companies with them–names like Medium or the David Allen Company (ironically, itself a pioneer of an alternative management system).

What is Holacracy, anyway?

Holacracy’s biggest innovation is its radical re-thinking of the way organizations operate. In essence, it does away with existing hierarchies altogether, throwing out the traditional, pyramid-shaped organizational charts, which typically consist of the CEO at top, with managers and employees in descending order. This management model, wherein decision-making and power flow from the top, is the paradigm for management today–as well as the one which the majority of workers are most familiar with. Chances are, if you’ve ever spent any time in the workforce, you’ve likely operated mostly (or entirely) under this model.

Instead, Holacracy opts for decentralized, decision-making, empowering employees–and, along the way, boosting innovation by reducing bureaucratic barriers and red tape. Under a Holacratic system, a company structure revolves not around power–but around roles. Rather than centering around instructions from a centralized authority (such as a CEO or manager) who sets priorities, allocates resources, and hires/fires, work is defined around roles. Such roles consist of responsibilities–and to make things more complex, roles are being constantly redesigned. Though there is a nominal form of authority (“lead links”, rather than managers), this position doesn’t control colleagues, but rather the responsibilities associated with each role–in theory.

Under this model, each employee would fill multiple roles, with teams making decisions locally; at its most ideal, the company resembles a thriving hive of self-directed, low-level activity, which would fuel expansion in multiple directions. Indeed, the main argument for flat management is such cooperation: supporters believe that such workplaces can more easily encourage collaborations between those who don’t normally have the opportunity to do so, leading to increased creativity.

Easy to say and read, but how does the hypothetical stack up against the real world?

Holacracy at Medium

In some ways, it’s easy to see why Holacracy is popular–and why such a radical system would be adopted by Medium. Founded by Evan Williams, currently the CEO (and previously a co-founder of Twitter), Medium was originally conceived as a platform for all writers. In this sense, Medium is an experiment in social journalism, a hybrid model that includes longform content from across the spectrum, from professional investigative reporters to hobbyists. In one interview, Williams stressed the importance of curating people’s reading habits (and perhaps affecting public empathy and knowledge for the better) through sharing detailed, well-written think pieces.

This is due, mainly, to Holacracy. Medium adopted this system back in 2012, when the blogging platform was still in its early stages. When Medium adopted Holacracy, the company adhered to a number of key, typically Holacratic tenets, which included, among others, the removal of managers in favor of maximum autonomy for employees, distributing decision-making power and discouraging consensus-seeking, and codifying a tension resolution process.

Losing the Human Factor

So what happened?

A big part of the equation boils down to human nature. Put simply, humans simply aren’t designed to operate like software. In every facet of a Holacratic system, humans (and specifically, their humanity) are treated as barriers to efficiency, not to be adjusted for and empathized with, but subordinated. It is certainly true that Holacracy replaces one (potentially) dictatorial system, that of managers–only to replace it with another: process.

All of these problems were evident at Medium. To return to the previous Fast Company profile, readers will notice several red flags, the most blatant of which is the lack of managerial duties and the cumbersome facilitation procedures. For instance, though the article is a long read, not once did the company ever mention matters of salary–particularly salary raises, which are often a frequent source of tension, and require a skilled manager to sort out. In the absence of such a person, who determines pay? Who explains to employees how much they can expect for a raise, or work with them on how they can improve their performance to get a bigger pay raise next time? Granted, one can delegate this responsibility to the lead link–but that would defeat the purpose. Recall that in Holacratic theory, lead links are saddled with defining responsibilities and roles, not managing.

Moreover, the emphasis on process over people and substance didn’t help. Paul Bradley Carr, writing at tech-news site Pando Daily, puts it best: “Holacracy is great until you try to use it in a big company, at which point everyone gets bogged down with paperwork and [nonsense].” Nor is Carr the only one to express such a view. Yu-kai Chou, a pioneer in gamification, reached very similar conclusions independently. “Designs,” Chou writes, “work best when they are human-focused, not function-focused.”

Was Holacracy doomed to fail?

In hindsight, perhaps these problems should have been expected. After all, the founder of Holacracy, software engineer Brian Robertson, never held a formal management position, only working as a CTO, engineer, and entrepreneur. This lack of experience (and perhaps, empathy with the human condition) shows: just take a look at the entry on processing tensions from the Holacracy Constitution: note that tensions aren’t defined as the normal disagreements between two (or more) autonomous individuals, but rather, as a “gap between what is, and what could be better.”

This failure to grasp humane problem solving is key to Holacracy’s failure. Julia Culen, a partner at a consulting firm which attempted Holacracy (she later left), explains this in detail. Not only is Holacracy unrealistic in that it offers a one-size fits all solution to a variety of diverse problems (which vary from one company to the next), its dogmatic emphasis on process stymied any discussion and thus, solution of the truly pressing issues. In Culen’s case, Holacracy diverted energy and time from figuring out her firm’s actual pain points, such as lack of innovation, unclear strategy, critical market feedback, and low morale. Note that none of these problems can be solved through reorganizing the firm into circles, roles, and points.

In truth, Holacracy isn’t a fully developed product, but a work in progress. And despite well-earned criticism, flat-management structures can be pulled off effectively. In fact, Holacracy isn’t the only game in town; a number of companies, most notably GE, have implemented their own flat, self-managed models with much more success.

In our next installment, we’ll discuss Holacratic alternatives–and what they get right.